It’s extremely important to save enough money to cover housing-related fees. These can include things like the down payment, closing costs, and moving expenses. You also need to be prepared for additional expenses, such as unexpected costs associated with being a homeowner such as utility startup costs. And you may need or want more or different furniture for your new home as well.
If you are considering buying a home, then it’s time to start saving to make sure you are financially ready. Saving is one of the most important steps in the homebuying process, and it can also be the step that takes the longest. Saving up enough money requires extra planning. Plus, you may be trying to pay off debt, such as student loans, credit cards, or car loans.
CREATING A BUDGET
While many different saving methods and online budgeting tools are available, one simple method is to start by understanding your total monthly income and expenses and create a budget. Budgeting can also reveal where you might be able to eliminate or reduce expenses to help you save. A budget only works, though, if you’re committed to it.
SET GOALS
An easy way to start saving is by setting some financial goals for yourself, such as how much you want to put aside and a deadline for saving that amount. Then, find a strategy that works with your financial situation and lifestyle. For example, you can use direct deposit to automatically transfer a specific amount from your paycheck into a savings account. That way, the temptation to spend money isn’t there.
Also, consider looking at what you spend and determining where you can cut back. Do some research to find the best strategy for you, and keep in mind that every dollar really does make a difference.
MINDSET
Be positive and realistic about budgeting. Establishing a budget can be overwhelming at first, so it is important to think of budgeting as a plan to achieve your personal and financial goals. If you create a budget that is too restrictive, you might be less inclined to follow that budget. Keep in mind that the best budget is one that you can follow long term.
YOUR EXPENSES
Make a list of your expenses. Tracking your spending for at least 30 to 60 days is typically the first step in making a budget, and it will give you a good indication of where you need to make changes. Once you have the full view, it will be easier to identify ways to spend less each month so that you can start saving more.
When creating your budget remember to:
Be realistic and create a plan that is achievable.
Continually review your budget and track spending. Allow for changes. If something isn’t working, identify other changes you can make.
Find balance. If you spend less in one area, you can save or spend more in another. The more details you include in your budget, the better you will be able to balance and re-adjust.
When planning to purchase a home, budgeting will help you save for your down payment, but you shouldn’t stop there. Once you purchase your home, you will need savings for maintenance, unexpected repairs, and upgrades you may want to make. Budgeting will help ensure you meet your monthly expenses and build savings for the expected and unexpected costs of your home.
Saving Tips
When developing your budget, it needs to be one you can maintain. That means all members of the household need to be included in the planning and be committed for it to work. By including everyone, you can keep each other on track and focused on the goal.
AREAS OF SAVINGS
Find areas where you can save. Doing things like buying generic grocery items instead of name brand, eliminating cable TV, and packing a lunch instead of buying it can save a good amount of money every month.
Also, aim for no-spend days or even a week or a month where you commit to not buying anything but the absolute necessities, such as food you cook at home. If you eat out frequently, try designating one night a week as “restaurant night” so that it becomes a special activity.
If you tend to overspend in certain areas, try to avoid using credit cards and switch to a cash-only approach. One cash approach could be putting your month’s budget in an envelope and commit to only spending what’s in that envelope.
Small changes to old habits can help get your spending under control.